Determination of the regular hourly wage:

Example 2 – Commission

An employee of a plumbing repair company is paid commissions based on billed hours and product sales. The employee earns 20% of the billed hours (hourly rate charged the customer) for each repair completed. The employer’s labor rate billed to customers is $80 per hour. The employee earns 40% commission on the sale of water heaters and plumbing fixtures. The employer maintains time cards for each employee indicating the operations performed, the time the employee started and ended each work period throughout the workday, the total daily hours worked, and remuneration earned by each employee. During the pay period the employee worked 65 hours, although only 43 hours were billed to customers. The employee also sold plumbing fixtures totaling $1,500.

Determination of the regular hourly wage:

Note that in the above example, if the hourly wage calculation were based, incorrectly, on billable hours, the regular hourly wage would be overstated. Therefore, if time cards or time book entries to verify the hours worked are not available, the payroll shall not be assigned to a classification that requires the regular hourly wage to equal or exceed a specified amount. It is incorrect to base the regular hourly wage calculation on billed hours.

Example 3 – Salary

An employee of a sheet metal contractor is retained as project supervisor at an annual salary of $60,000. The employee was retained for only three months during the policy period.

• As the employee was salaried for 3 of 12 months or 25% of the annual salary period, the regular hourly wage is calculated based on the prorated salary ($60,000 x 25% = $15,000), divided by the prorated number of hours (2,000 x 25% = 500). The regular hourly wage calculation is $15,000 / 500 = $30.00 per hour.
• During the three-month period, the project supervisor earned a one-time $3,000 bonus that was paid at the end of the project. Although this bonus must be included as reportable payroll (see Section V, Rule 1, Payroll – Remuneration), it is excluded from the regular hourly wage calculation because the bonus is not calculated and paid each pay period. The regular hourly wage remains $30.00 per hour as calculated above.

A different employee is retained for a three-month project with the same salary. This employee earns a $100.00 production bonus each two-week pay period ($100.00 x 6 pay periods = $600.00). As these bonuses are calculated and paid each pay period, the regular hourly wage is calculated based on the prorated salary ($60,000 x 25% = $15,000), including the production bonuses ($600.00), divided by the prorated number of hours (2,000 x 25% = 500). The regular hourly wage calculation is $15,600 / 500 = $31.20 per hour.

An executive officer receives an annual salary of $40,000. The applicable minimum remuneration for executive officers during the policy period is $50,000 per annum. Although $50,000 must be reported as payroll (see Section V, Rule 1, Payroll – Remuneration, Subrule j), that amount is not used to calculate the regular hourly wage; the regular hourly wage is calculated based on the salary divided by 2,000 hours. The regular hourly wage calculation is $40,000 / 2,000 = $20.00 per hour.

b.    Governing Classification (Construction or Erection)

The governing classification shall be determined on the basis of the job within the policy period if payrolls are kept separately by job within the policy period; otherwise, on the basis of the entire policy period. Two classifications distinguishable only by the regular hourly wage of employees shall be combined to determine the governing classification.

c.     Miscellaneous Employees (Construction or Erection)

If the construction or erection operations at any location are assigned to two or more classifications, the payroll of all miscellaneous employees who cannot properly be assigned to specific classifications shall be assigned to the governing classification, except that when the governing classification is determined to be the combination of two classifications distinguishable only by the regular hourly wage of employees, the payroll of a miscellaneous employee shall be assigned based on the regular hourly wage of such employee. Miscellaneous employees include but are not limited to supervisors, watchpersons, traffic control flagpersons, drivers, construction or safety engineers, construction debris clean-up employees and job site equipment maintenance and repair employees.

d.    Executive Level Supervisors

Executive level supervisors oversee the insured’s construction operations through second level (or higher) supervisors. In addition, on job sites where the insured subcontracts all operations to licensed subcontractors, executive level supervisors may oversee operations through subcontractors. Notwithstanding any other provisions contained herein, it is not permissible to divide a single employee’s payroll, within a single policy period, between Classification 5606, Contractors – construction or erection – executive level supervisors, and any other classification.

Executive level supervisors over construction operations wherein the insured develops payroll in one or more construction or erection classifications shall be eligible for Classification 5606 provided not less than two levels of supervision, as defined below, are retained between the executive level supervisor and the workers performing the actual construction operations.

(1)  First level supervisors generally work at a job site with a single crew of workers performing a single trade and do not travel between concurrent job sites to supervise different crews. While first level supervisors may engage in construction activities alongside the crew, as supervisors they have the authority to direct and control the crew’s work. This control includes training, evaluating, and disciplining crewmembers. Employees who assist with training or leading a crew, but who do not have the authority to direct and discipline crewmembers, or are not accountable for the work performed by the crew, are not considered first level supervisors.

(2) Second level supervisors generally have broad authority over the work crews at one or more job sites. Second level supervisors direct and control the work of first level supervisors. The duties of second level supervisors are exclusively supervisory in nature.

e.     Idle Time, Strike Pay, or Other Payroll Paid for Hours Not Worked

If an employee’s payroll is segregated among classifications based upon the hours worked in each operation, the payroll for idle time, strike pay, or other payroll paid for hours not worked shall be apportioned among the classifications applicable to the employee’s payroll based on the earnings for time actually worked in those classifications.

Example

A construction worker engages in fence construction and conduit construction. The worker is paid $12 per hour for fence work and $15 per hour for conduit work. The number of hours recorded for fence work, conduit work and idle time is shown below. The earnings for time actually worked in Classification 6400 is 63.8% of the payroll for Classifications 6400 and 6325 combined ($264.00 / $414.00 = 63.8%). The idle time apportioned to Classification 6400 is therefore 5.1 hours (8 hours idle time x 63.8% = 5.1 hours), the payroll for idle time in this classification is $61.22 (5.1 hours x $12 per hour idle time = $61.22), and the total payroll in this classification is $325.22 ($264.00 payroll + $61.22 idle time payroll = $325.22). The earnings for time actually worked in Classification 6325 is 36.2% of the payroll for Classifications 6400 and 6325 combined ($150.00 / $414.00 = 36.2%). The idle time apportioned to Classification 6325 is therefore 2.9 hours (8 hours idle time x 36.2% = 2.9 hours), the payroll for idle time in this Classification is $34.78 (2.9 hours x $12 per hour idle time = $34.78), and the total payroll in this Classification is $184.78 ($150.00 payroll + $34.78 idle time payroll = $184.78).